DTE plan doubles renewable energy investments

DTE's plan answers environmental and renewable energy critics that contend the company isn't doing enough to invest in solar and wind power

Mark Houston

Turbines at the DTE's Pinnebog wind park in Huron County

DTE Energy plans to add 1,000 megawatts of solar and wind power by 2022, doubling its current capacity and investments in renewable energy.

The locations of the proposed renewable power sources were not announced.

If approved this year by the Michigan Public Service Commission, these new renewable energy projects would represent an $1.7 billion investment in Michigan. The additional 1,000 megawatts, primarily wind, would power more than 450,000 homes and increase DTE's renewable energy portfolio standard to 15 percent of generation, up from about 10 percent.

By Dec. 31, 2021, Michigan's new energy law requires power producers to generate 15 percent of their power renewable resources. DTE's plan will get the company to that goal, but it is unclear if DTE will exceed that goal. A proposed ballot measure, which DTE and Consumers Energy Co. opposes, would increase that renewable target to 30 percent by 2030.

In what is known as an "integrated resource plan," which electric companies are required to submit every five years with the MPSC under the state's 2016 energy legislation, DTE has proposed to increase its renewable energy capacity to 2,000 megawatts from the current 1,000 megawatts that would power 850,000 homes, or nearly 40 percent of its 2.2 million electric customers in Michigan.

Crain'spreviously reported that DTE plans to add 4,000 megawatts of renewable power over the next 20 years as it retires several aging coal-fired plants. DTE told Crain's earlier this month it would announce a major renewable energy wind project in the range of 150 megawatts, so the announcement Friday of 1,000 megawatts indicates DTE has had a bigger plan in the works to more than double down on renewables.

"The plan we have filed takes another significant next step toward our goal of cutting carbon emissions by more than 80 percent by 2050 while continuing to deliver reliable and affordable power for our 2.2 million customers," DTE Energy Chairman and CEO Gerry Anderson said in a statement.

"Due to our substantial investments and use of renewable energy, DTE has already reduced its carbon emissions by nearly 25 percent by driving investments of approximately $2.5 billion over the last 10 years in Michigan's renewable energy sector and adding 1,000 megawatts of wind and solar capacity."

DTE also has asked the MPSC to approve its proposed $1 billion, 1,100 megawatt gas-fired power plant in St. Clair County. A decision is expected in April. The company says it wants to break ground on the project in 2019 and begin producing enough electricity to power 850,000 homes. The proposed gas plant and renewable energy projects would power more than 80 percent of DTE's customers, the company said.

DTE Energy Co. has faced opposition from environmental and renewable-energy groups to its gas plant who say the gas plant will cost ratepayers $340 million more than it would spend investing in renewable energy and various efficiency programs. The MPSC recommended approval of DTE's plan, but noted the commission could require DTE to resubmit its plan under the state's new energy law IRP requirements.

DTE says building the gas plant is the least costly option for customers, will help it reduce carbon emissions by 30 percent by 2030 and will replace some lost jobs due to coal plant closures in St. Clair County.

In its IRP, DTE also said it wants to offer a new renewable energy program designed for large business customers seeking to reduce carbon emissions to invest in renewable energy. The program could provide an additional 300 megawatts of renewable resources beyond those proposed to meet the 15 percent RPS requirement. DTE offers a slightly different MIGreenPower voluntary program to residential customers where people pay extra on their monthly bills to support renewable energy capacity.

Businesses have increasingly been interested in converting to renewable energy, with some setting a goal to convert to 100 percent renewable sources.

The IRP plan also includes the launch of a pilot program for battery storage technology aimed at improving the reliability of energy provided from wind and solar power, areas that environmental groups have encouraged DTE to invest in. Battery storage technologies hold much promise, but experts say more research and development is needed to improve efficiencies.

Under an IRP, regulated utilities like DTE are required to develop long-term plans on how they will meet electricity demand in their service areas. The plans also must include evaluations of energy waste reduction, supply sufficiency, demand response and the impact of state and federal environmental regulations. Any new generation source is required to be the lowest-cost and best option.

By adding another 1,000 megawatts of renewable energy, DTE also appears to be trying to save money on development costs by gaining tax credits, which will phase out over the next five years, and take advantage of historic low prices for solar and wind technology.

Legislation that grants the 30 percent federal tax credits for solar begins to phase down in 2020 to 26 percent, 21 percent in 2021 and down to 10 percent in 2022 for commercial. Residential solar tax credits expire in 2022. Wind tax credits end in 2019.

DTE is announcing more renewable energy, which it will build and bill customers for, after it recently told the MPSC that it will not need at least 104 megawatts of renewable electricity from several small hydroelectric, landfill gas and biomass entities that it has under contract.

The small renewable energy operators contract with DTE and with Consumers Energy Co. under a federal law, Public Utility Regulatory Power Act, passed in the 1970s to encourage small renewable energy generation under 20 megawatts. Under PURPA, utilities must pay the price based on the "avoided costs" to generate the same amount of power used in the current standard power-generation source, which used to be coal and now is a hybrid combined natural gas cycle source.

DTE told the MPSC that it won't need these contracts when they begin to expire in 2024. DTE's decision on some PURPA contracts is under appeal.

"Beyond this plan, DTE will continue to add additional renewable energy resources," Anderson said. "Reducing our company's carbon emissions and developing cleaner sources of energy is a key priority for us. This work will also bring positive economic impacts such as job creation and local community revenue."

In its statement, DTE said it has studied the engineering and the economics of Michigan's energy future for two years before announcing last year its initiative to reduce carbon reduction emissions by more than 80 percent by 2050.

"We've concluded not only that the 80 percent reduction goal is achievable, it is achievable in a way that ensures Michigan's power is safe, secure, affordable, reliable — and sustainable," Anderson said. "There doesn't have to be a choice between a healthy environment and a healthy economy, although the debate often gets framed that way. We can have both, if we invest in a smart way."

Here are some additional highlights of DTE's IRP:

The Pine River wind park will come online later this year and the Polaris wind park in 2019. The wind parks have capacity to generate up to 330 megawatts.

Another two additional wind parks are on the drawing boards that will provide a combined 375 megawatts and begin operation in 2021 and 2022.

Installing approximately 15 megawatts of new Michigan-based solar capacity over the next three years, increasing DTE's solar capacity by almost 25 percent over the next three years.

The DTE portfolio also includes non-utility energy businesses focused on power and industrial projects, natural gas pipelines, gathering and storage, and energy marketing and trading.

Over the past several years, DTE's earnings have been driven by non-utility business, primarily its gas pipelines and storage operations. In fiscal 2017 ended Dec. 31, DTE reported $153 million in profits on its gas pipeline business compared with $143 million on its electricity business and $53 million on natural gas sales.

DTE earned $1.1 billion in 2017, or $6.32 per share, compared with $868 million, or $4.83 per share in 2016. DTE also saved about $190 million from federal tax reform.